Dividend Payout of S&P 500 on Pace for Record Year

Senior Editor

Aggregate dividend payouts are on pace to hit a record among Standard & Poor’s 500 index members this year, and there are more dividend payers in the index than there have been since the beginning of 2000. But dividend taxes may soar next year, which could shift companies into share-repurchase mode, according to data distributed by S&P Thursday.

Following 22 dividend initiations last year and eight so far this year, 401 of the S&P 500 now pay dividends, according to Howard Silverblatt, senior index analyst at S&P Indices. In 1977, the earliest year for which Silverblatt provided data, 473 of the 500 paid dividends, a number that fell to as low as 351 in 2001 and 2002.

Silverblatt projects companies in the index will spend at least $279 billion this year on dividend payments, up nearly 16% from $241 billion in 2011 and 12.5% above the previous record of $248 billion set in 2008. He said this year’s estimate is “under review,” and suggested it will be revised higher.

“At this point, taxes are my main concern for dividends,” Silverblatt wrote on Thursday, noting that current legislation may increase the dividend taxes paid by individuals to 43.4% next year, nearly triple the 15% rate today. “From a planning perspective, this will force corporations to reexamine their return-to-shareholders policy, potentially pulling back on dividend increases and increasing share buybacks.”

Silverblatt also recently said he expects some companies that historically pay their dividends in January to consider shifting that payment to December because of the tax consequences for shareholders.

Exxon Mobil announced a 21.3% dividend boost on Wednesday, making it the top dividend payer in the index with a $10.75 billion annual payout, ahead of the $10.44 billion paid by AT&T. Apple is in third place, and will pay out $9.9 billion in dividends as part of its recently announced, first-ever dividend and share-repurchase program. With Apple’s dividend, information technology vaults into second place among top sector dividends, and Silverblatt said if Google were to initiate a dividend that pays a similar, sub-2% yield to Apple’s, IT would take over the top spot from consumer staples.

Nearly across the board, mid-market executives are hiring new employees, buying new technology solutions, acquiring businesses to reach new markets and preparing IPOs, according to a Deloitte survey of more than 500 mid-market executives. But companies are running up against a number of constraints as they seek to expand, particularly in acquiring and retaining skilled talent.